The Insured Retirement Institute is throwing its weight behind legislation that would require all but the smallest employers to sponsor 401(k) plans.
The Automatic Retirement Plan Act of 2017, sponsored by Rep. Richard Neal, D-Mass., would provide a “purely private-sector solution” to the access gap in workplace retirement plans, said Lee Covington, senior vice president and general counsel at IRI, in a press call.
Neal’s bill requires all private sector employers with more than 10 employees to offer a defined contribution retirement plan. Covington said the mandate is prescribed “in a way to make it painless for small-business owners.”
IRI’s support for the bill is laid out in the organization’s 2018 Retirement Security Blueprint, released Wednesday. Previous Blueprints from IRI, whose membership includes insurers, broker-dealers and asset managers, have supported legislation advanced by Neal and others that would mandate enrollment in IRAs for workers without access to a retirement plan.
“We know there is some interest with Republican members,” Covington said of the Automatic Retirement Plan Act.
Data varies on the extent of access and participation rates in workplace plans. About 66% of nonunion, private-sector workers have access to a workplace retirement savings plan, according to the Labor Department. Only 50% of the private-sector workforce actually participates in retirement plans.
Data from Pew Charitable Trusts shows that 52% of adult workers do not participate in a workplace plan; 68% of millennials are without access to a retirement plan. Pew draws its data from the 2012 Census Bureau survey, which some economists have shown underreports access to retirement plans.
Nevertheless, tens of millions of Americans lack access to retirement plans through their employers. The Automatic Retirement Act would “assure most Americans have access to a 401(k) plan,” said Covington.
The 2018 Blueprint lays out a host of policies to address retirement savings shortfalls.
“We have serious retirement security challenges to contend with in the U.S.,” said Covington. Research from IRI shows only 23% of baby boomers are confident their savings will last through retirement.
Some of the policies IRI is advocating for could be advanced administratively through rulemaking by the Labor Department.
The establishment of open multiple employer plans, which would allow small businesses to more readily pool workers under one retirement plan, could be achieved through rulemaking. So could a clearer safe harbor for employers when selecting annuities for retirement plans, and retirement income estimates on retirement plan statements.